<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-Q/A
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
---
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1997
COMMISSION FILE NUMBER 0-26142
BELMONT HOMES, INC.
-------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MISSISSIPPI 64-0834574
----------- ----------
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
HIGHWAY 25 SOUTH, INDUSTRIAL PARK DRIVE
BELMONT, MISSISSIPPI 38827 (601) 454-9217
-------------------------- --------------
(Address, including zip code of principal executive (Registrant's telephone number, including area code)
offices)
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
At November 4, 1997 9,467,000 shares of the Registrant's $.10 Par
Value Common Stock were outstanding.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BELMONT HOMES, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED - IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $56,931 $57,512 $179,575 $170,638
Cost of sales 48,993 48,645 154,875 144,289
------- ------- -------- --------
Gross profit 7,938 8,867 24,700 26,349
Selling, general and administrative 6,293 3,637 18,633 11,349
------- ------- -------- --------
Income from operations 1,645 5,230 6,067 15,000
Other income (expense):
Interest expense (88) (9) (432) (75)
Interest income 168 177 435 459
Officers life insurance 1,500
------- ------- -------- --------
Income before income taxes 1,725 5,398 7,570 15,384
Income tax expense 673 2,043 2,388 5,848
------- ------- -------- --------
Net income 1,052 3,355 5,182 9,536
------- ------- -------- --------
Net income per common share $.11 $.35 $.55 $1.02
------- ------- -------- --------
Weighted average common shares
outstanding 9,482 9,551 9,482 9,378
------- ------- -------- --------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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BELMONT HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNAUDITED
SEPTEMBER 30, DECEMBER 31,
------------- ------------
1997 1996
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,521 $ 5,070
Certificates of deposit 8,588 8,243
Accounts receivable, net 10,940 7,829
Inventories 12,350 13,020
Prepaid and other 2,815 2,661
------- -------
Total current assets 39,214 36,823
Property, plant and equipment, net 21,607 22,318
Goodwill and other assets, net 19,367 20,214
------- -------
$80,188 $79,355
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ -- $ 9,093
Accounts payable 6,084 3,461
Accrued expenses 14,168 10,744
------- -------
Total current liabilities 20,252 23,298
Long-term debt -- 1,303
Deferred income taxes 907 907
------- -------
Total liabilities 21,159 25,508
------- -------
Shareholders' equity:
Common stock 947 947
Additional paid-in capital 27,372 27,372
Retained earnings 34,203 29,021
Adjustment to predecessor basis (3,493) (3,493)
------- -------
Total shareholders' equity 59,029 53,847
------- -------
$80,188 $79,355
------- -------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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BELMONT HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,182 $ 9,536
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 2,148 1,188
Loss on leasehold improvements at closed plant 299
Changes in operating assets and liabilities:
Accounts receivable (3,111) (3,835)
Inventories 670 (3,831)
Prepaid and other 122 (128)
Accounts payable 2,623 3,155
Accrued expenses 3,424 4,269
-------- --------
Net cash provided by operating activities 11,357 10,354
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (1,165) (4,834)
Certificates of deposit (345) (1,421)
Investment in supply joint ventures -- (2,505)
-------- --------
Net cash used by investing activities (1,510) (8,760)
Cash flows from financing activities:
Proceeds from notes 2,200
Repayment of long-term debt (10,396) (10,940)
Proceeds from sale of common stock net of
offering costs 12,390
-------- --------
Net cash provided by financing activities (10,396) 3,650
-------- --------
Net increase (decrease) in cash and equivalents (549) 5,244
Cash and equivalents at beginning of year 5,070 2,055
-------- --------
Cash and equivalents end of period $ 4,521 $ 7,299
-------- --------
</TABLE>
See Note to Condensed Consolidated Financial Statements.
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BELMONT HOMES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED QUARTERLY FINANCIAL
STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
In June 1993 Belmont Homes, Inc. ("Belmont"), which was 43% owned by
shareholders of BHI, Inc. (Predecessor) and 57% owned by new investors, acquired
through the issuance of debt and equity securities, substantially all of the
assets and liabilities of Predecessor for a purchase price of $15,541. This
transaction was accounted for using the purchase method of accounting including
the computational guidelines contained in EITF Issue No. 88-16.
In August 1995 Belmont incorporated Delta Homes, Inc., a wholly-owned
subsidiary and purchased for $450 a production facility in Clarksdale,
Mississippi.
In October 1995 Belmont acquired, in a transaction accounted for using
the purchase method of accounting, all the outstanding common stock of Spirit
Homes, Inc. ("Spirit") for $9,800 of cash and debt.
In October 1996 Belmont acquired, in a transaction accounted for using
the purchase method of accounting, all the outstanding common stock of Bellcrest
Homes, Inc. ("Bellcrest") for $9,500 of cash plus future contingent payments of
$3,500 if certain earnings levels are achieved through December 31, 1998. In
March 1997 the Company paid the former shareholders of Bellcrest $1,000 the
amount of contingent payments earned and accrued for in 1996.
The condensed consolidated financial statements include the accounts of
Belmont Homes, Inc. and its wholly-owned subsidiaries from incorporation or
acquisition date (collectively, the "Company") and have been prepared without
audit pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with Generally Accepted Accounting
Principles have been omitted. The condensed financial statements should be read
in conjunction with the Company's audited financial statements and notes
thereto.
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In the opinion of management, all adjustments, consisting only of
normal recurring adjustments that are necessary for a fair presentation, have
been included in the condensed consolidated financial statements for the interim
periods ended September 30, 1997 and 1996. The results of operations for the
three and nine month periods are not indicative of the results of operations to
be expected for the full year ending December 31, 1997 or any other interim
period.
(2) INVENTORIES
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
---- ----
<S> <C> <C>
Raw materials $9,077 $ 9,702
Work-in-process 641 798
Finished homes 2,632 2,520
------- -------
$12,350 $13,020
------- -------
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated information
derived from the Company's condensed financial statements expressed as a
percentage of net sales:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 86.1 84.6 86.2 84.6
----- ----- ----- -----
Gross profit 13.9 15.4 13.8 15.4
Selling, general and administrative 11.3 6.3 10.4 6.7
----- ----- ----- -----
Income from operations 2.9 9.1 3.4 8.8
Interest income (expense), net .1 .3 -- (.2)
Officer life insurance .8
Income taxes 1.2 3.6 1.3 3.4
----- ----- ----- -----
Net income 1.8 5.8 2.9 5.6
----- ----- ----- -----
</TABLE>
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THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996
Industry conditions in the Company's market territory remained
competitive due to an increase in the number of dealers (retailers) and
manufacturing plants in, or selling to, the Company's market territory. In
response, the Company re-aligned its manufacturing operations at the end of
the second quarter, idling one plant each at its Belmont and Spirit plant
clusters and closing a leased plant at Spirit which was rented on a month-to-
month basis. There was no severance paid as a result of this re-alignment and
the Company charged to expense all costs related for this action which consisted
primarily of $299 thousand for the write off of leasehold improvements at the
closed plant. The two idled plants may be reopened as market conditions improve.
Net sales for the three months ended September 30, 1997 deceased by 1%
to $56.9 million from $57.5 million for the three months ended September 30,
1996 due to a $14.5 million decline in sales at the Company's Belmont and Spirit
operations. These sales declines were off set in part by the contribution of the
Company's Bellcrest Homes subsidiary which was acquired during the fourth
quarter of 1996. The number of homes sold during the quarter decreased 10% to
2,477 homes from 2,741 in the third quarter of 1996. Multi-sectional homes
increased to 38.2% of homes sold during the third quarter of 1997 from 22.9% in
the same quarter of 1996 due primarily to sales at Bellcrest Homes whose
multi-sectional mix was 73% for the quarter. The average price of a home sold
increased 14.2% to $22,984 in the third quarter of 1997 from $20,982 in 1996
due, in part, to the higher mix of multi-sectional homes sold by the Company
during the quarter.
Cost of sales includes costs of raw materials, direct labor, service
and warranty expense, insurance and payroll taxes. Cost of sales during the
third quarter of 1997 increased 1% to $49 million from $48.6 million for the
third quarter of 1996. Cost of raw materials and direct labor, which are two of
the largest components of cost of sales, were $34.7 million and $7.3 million,
respectively, for the third quarter of 1997 compared to $37 million and $6.7
million, respectively, for the third quarter of 1996. The $2.3 million decrease
in raw materials is due primarily to the higher mix of multi-section homes
during the quarter which as a percentage of sales value have a lower material
content. The $.6 million increase in direct labor is due primarily to higher
labor at operations where plants were idled and closed as these operations
adjusted to new mixes of homes and shorter production runs. As a percentage of
net sales, cost of sales for the third quarter of 1997 increased to 86.1% from
84.6% in the third quarter of 1996, due to (i) the $.6 million increase in
direct labor, (ii) a $.7 million increase in supervisory salaries to $1.7
million for the third quarter of 1997 from $1.0 million in the third quarter of
1996 of which $.5 million is due to increased incentive compensation including a
$.2 million payment to the estate of the Company's former President and CEO who
died in May 1997, and (iii) a $1 million increase in service and warranty to
$2.5 million in the third quarter of 1997 from $1.5 million in the third quarter
of 1996 of which $.2 million pertains to the Company's Spirit operations which
continues to experience increasing levels of warranty service, a $.2 million
increase in the warranty accrual in response to the continuing higher service at
Spirit and the inclusion of Bellcrest Homes which was acquired during the fourth
quarter of 1996.
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<PAGE> 8
Selling, general and administrative expenses for the third quarter of
1997 increased 75% to $6.3 million in the third quarter of 1997 from $3.6
million in the third quarter of 1996 primarily as a result of increased dealer
promotion costs and the addition of Bellcrest Homes which was acquired during
the fourth quarter of 1996. Dealer promotion costs increased $1.1 million to
$2.6 million in the third quarter of 1997 from $1.5 million in the second
quarter of 1996. The Company believes the number of dealers and manufacturers in
its market territory has increased and expects these higher promotion costs to
continue. As a percentage of net sales, selling, general and administrative
expenses increased to 11.1% for the third quarter of 1997 from 6.3% for the
third quarter of 1996 due primarily to the higher dealer promotion costs and
increases in selling and administrative salaries and commissions.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996
Net sales for the nine months ended September 30, 1997 increased 5% to
$179.6 million from $170.6 million for the nine months ended September 30, 1996
due to the acquisition of Bellcrest Homes which was acquired during the fourth
quarter of 1996. The number of homes sold decreased 2% to 8,020 in 1997 from
8,198 in 1996. Multi-section homes increased to 34.7% of homes sold during the
nine months ended September 30, 1997 from 24% in the prior year period due to
the higher such mix of homes at Bellcrest Homes whose multi-section mix was 68%
in 1997. The average price of a home sold increased 6.7% to $22,391 in the nine
months ended September 30, 1997 from $20,815 for the comparable period in the
prior year due in part to the higher mix of multi-section homes.
Costs of sales for the nine months ended September 30, 1997 increased
7.3% to $154.9 million from $144.3 million for the nine months ended September
30, 1996. Costs of raw materials and direct labor increased to $112.1 million
and $21.9 million, respectively, in 1997 from $108.6 million and $19.8 million,
respectively, in 1996 primarily as a result of increased sales volume and in
addition, for direct labor, for increases due to higher labor for the Company's
operations which idled and closed plants at the end of the second quarter due to
reduced orders. As a percentage of net sales, cost of sales for the nine months
ended September 30, 1997 increased to 86.2% from 84.6% due primarily to (i)
increased direct labor, (ii) a $1.5 million increase in salaries and wages to
$4.9 million during the nine months ended September 30, 1997 from $3.5 million
for the comparable period of the prior year due in part to the inclusion of
Bellcrest Homes which was acquired during the fourth quarter of 1996 and (iii) a
$1.1 million increase in warranty costs to $6.6 million for the nine months
ended September 30, 1997 from $5.6 million in the comparable period of the prior
year due to increases in warranty as a result of the inclusion of Bellcrest
Homes in 1997 and to an approximate $.5 million increase at the Company's Spirit
Homes operations. These increases as a percent of net sales were off set in part
by a decrease in raw materials to 62.4% for the nine months ended September 30,
1997 from 63.6% for the prior year period due primarily to the higher mix of
multi-sectional homes which have a lower raw material content as a percent of
sales value.
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<PAGE> 9
Selling, general and administrative expenses for the nine months ended
September 30, 1997 increased 64% to $18.6 million from $11.3 million in the
comparable period of the prior year primarily as a result of increased dealer
promotion costs and the addition of Bellcrest Homes which was acquired during
the fourth quarter of 1996. Dealer promotion costs increased $4.2 million to
$8.3 million for the nine months ended September 30, 1997 from $4.1 million for
the comparable period in the prior year. The Company believes the number of
dealers and manufacturers in its market territory has increased and expects
these higher levels of promotional costs to continue. As a percentage of net
sales, selling, general and administrative expense increased to 10.4% for the
nine months ended September 30, 1997 from 6.7% for the nine months ended
September 30, 1996 as a result of the $4.2 million increase in dealer promotion
costs and a $1.3 million increase in selling and administrative salaries and
commissions to $5.8 million for the nine months ended September 30, 1997 from
$4.5 million for the comparable period of the prior year due in part to the
inclusion of such costs for Bellcrest Homes which was acquired during the fourth
quarter of 1996.
Interest expense for the nine months ended September 30, 1997 was $432
thousand compared to $75 thousand for the nine months ended September 30, 1996
due primarily to additional borrowings supporting the Bellcrest acquisition
during the fourth quarter of 1996. In September 1997 the Company paid off all
outstanding borrowings.
Income tax expense for the nine months ended September 30, 1997 was
$2.4 million or an effective tax rate of 31.5% compared to $5.8 million for the
nine months ended September 30, 1996 or an effective tax rate of 38%. The
differences in these effective rates is primarily attributable to the receipt
during the second quarter of 1997 of $1.5 million of Officer Life Insurance
which is non-taxable.
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents including certificates of deposit were $13.1
million at September 30, 1997 compared to $13.3 million at year end December 31,
1996.
Net cash provided by operating activities was $11.4 million for the
nine months ended September 30, 1997 compared to $10.4 million for the nine
months ended September 30, 1996 due in part to a $1.2 million increase in
depreciation and amortization (including the write off of leasehold improvements
at the closed Spirit plant) to $2.4 million for the nine months ended September
30, 1997 from $1.2 million in the comparable period of the prior year. Accounts
receivable are funded by approved dealer floor-plan financing and usually are
collected within 15 days, except in periods when extended terms are granted to
promote sales. All homes are manufactured against orders, and currently, no
homes are produced for inventory.
The Company utilized $1.2 million for the purchase of property, plant
and equipment during the nine months ended September 30, 1997 compared with $4.8
million during the nine months ended September 30, 1996. Expenditures during
1996 were primarily for the addition of
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<PAGE> 10
two plants at Spirit Homes. In addition, during 1996 the Company utilized $2.5
million for investment in two raw material supply joint ventures which produce
passage doors, paneling and cabinet doors.
The Company's financing activities used $10.4 million in cash for the
repayment of all short and long-term debt during the nine months ended September
30, 1997 compared with providing $3.7 million during the comparable period of
the prior year. In January 1996 the Company raised approximately $11.7 million
in net cash proceeds from the secondary sale of stock to the public and used
$10.9 million of these proceeds to retire outstanding debt.
The Company's backlog at September 30, 1997 was $12.8 million for 774
floors compared to $23.5 million for 1,485 floors at September 30, 1996.
The Company plans to continue its current growth strategy of acquiring
or constructing new production facilities when necessitated by consumer demand.
In order to provide any additional funds necessary for the continued pursuit of
this growth strategy, the Company may incur, from time to time, additional
short- and long-term bank indebtedness, including mortgage loans and industrial
revenue bond financing, and may issue, in public or private transactions, equity
and debt securities, the availability and terms of which will depend upon market
and other conditions.
Certain forward-looking statements in this Quarterly Report on Form
10-Q (including, without limitation, statements regarding the growth and
financing strategies of the Company, projections of revenues, income, earnings
per share or other financial items) involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance, or achievements expressed or implied by such
forward-looking statements. Such factors include general economic and business
conditions; industry trends; demographic changes; competition; raw material and
labor costs and availability; import protection and regulation; relationships
with customers, distributors or dealers; changes in the business strategy or
development plans of the Company; the availability, terms and development of
capital; changes in or failure to identify or consummate successful acquisitions
or to assimilate the operations of any acquired businesses with those of the
Company.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BELMONT HOMES, INC.
Date: November 19, 1997 /s/ William Kunkel
------------------
Executive Vice President
and Chief Financial Officer
